MC and True or False (Assuming no other factors are changed) Increasing the orde
ID: 359044 • Letter: M
Question
MC and True or False (Assuming no other factors are changed)
Increasing the order quantity will increase the fill rate.
Increasing the Reorder Point will increase the fill rate.
Increasing the order quantity will increase the cycle service level.
Increasing the Reorder Point (ROP) will increase cycle service level.
The more expensive the process for ordering replenishment inventory, the larger the cycle inventory should be.
The longer the lead time for replenishment of inventory, the larger the cycle inventory should be
The Economic Order Quantity (EOQ) model is used to resolve the trade-off between total costs (holding plus ordering) and frequency of stock-outs.
Assuming that demand and lead time do not change, an increase in the ROP (reorder point) will result in a decrease in the number of annual inventory turns
In the pipeline, it will be common to see multiple replenishment orders outstanding at the same time because:
a. quantity ordered < expected demand during the leadtime
b. quantity ordered < Inventory on hand at time order is placed
c. Inventory on hand at time order is placed < quantity ordered
d. Inventory on hand at time order is placed < expected demand during the leadtime
Explanation / Answer
Description
True/ False
Remarks
Increasing the order quantity will increase the fill rate
FALSE
Increasing safety stock increases Fill Rate
Increasing Reorder Point will increase fill rate
TRUE
Provided increasing Reorder Point increases Safety Stock assuming Average demand per period and Lead Time remains unchanged. Reorder point =Average demand x Lead time + safety Stock
Increasing Order Quantity will increase cycle service level
FALSE
Cycle Service level can be increased by increasing safety stock
Increasing reorder point will increase fill rate
TRUE
Provided increasing Reorder Point increases Safety Stock assuming Average demand per period and Lead Time remains unchanged
The more expensive the process for ordering replenishment inventory, the larger the cycle inventory should be
TRUE
Since ordering cost per order is more, therefore number of orders in a year to be less in order to minimize total ordering cost . Since number of orders to be less , ordering should be done less frequently making the cycle inventory larger
The longer the lead time for replenishment inventory , the larger the cycle inventory should be
TRUE
Cycle inventory should be proportional to “Average demand per period x Lead time”. Thus Cycle inventory would be more if Lead time is more
Economic Order Quantity ( EOQ) model is used to resolve the trade-off between total costs ( holding plus ordering ) and frequency of stock outs
FALSE
EOQ model is used to minimize total inventory cost ( holding plus ordering )
Assuming Demand and Lead time do not change , an increase in ROP ( reorder point ) will result in a decrease in the number of annual inventory turns
YES
Since” Reorder point = Demand x Lead time + Safety Stock”, increasing Reorder point will increase safety Stock quantity. Increasing safety stock increases Average inventory and Inventory turn reduces when average inventory reduces
In the pipeline , it will be common to see multiple replenishment orders outstanding at the same time
Inventory on hand at the time order is placed > Quantity ordered
Description
True/ False
Remarks
Increasing the order quantity will increase the fill rate
FALSE
Increasing safety stock increases Fill Rate
Increasing Reorder Point will increase fill rate
TRUE
Provided increasing Reorder Point increases Safety Stock assuming Average demand per period and Lead Time remains unchanged. Reorder point =Average demand x Lead time + safety Stock
Increasing Order Quantity will increase cycle service level
FALSE
Cycle Service level can be increased by increasing safety stock
Increasing reorder point will increase fill rate
TRUE
Provided increasing Reorder Point increases Safety Stock assuming Average demand per period and Lead Time remains unchanged
The more expensive the process for ordering replenishment inventory, the larger the cycle inventory should be
TRUE
Since ordering cost per order is more, therefore number of orders in a year to be less in order to minimize total ordering cost . Since number of orders to be less , ordering should be done less frequently making the cycle inventory larger
The longer the lead time for replenishment inventory , the larger the cycle inventory should be
TRUE
Cycle inventory should be proportional to “Average demand per period x Lead time”. Thus Cycle inventory would be more if Lead time is more
Economic Order Quantity ( EOQ) model is used to resolve the trade-off between total costs ( holding plus ordering ) and frequency of stock outs
FALSE
EOQ model is used to minimize total inventory cost ( holding plus ordering )
Assuming Demand and Lead time do not change , an increase in ROP ( reorder point ) will result in a decrease in the number of annual inventory turns
YES
Since” Reorder point = Demand x Lead time + Safety Stock”, increasing Reorder point will increase safety Stock quantity. Increasing safety stock increases Average inventory and Inventory turn reduces when average inventory reduces
In the pipeline , it will be common to see multiple replenishment orders outstanding at the same time
Inventory on hand at the time order is placed > Quantity ordered
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